China's richest man faces increased scrutiny

BEIJING—If popping up on the list of China's richest tycoons is a jinx, as some attest, then Huang Guangyu may be in for more tough days.

On Thursday, Forbes Magazine anointed the 37-year-old Huang, the head of a home-appliance retailing empire, as China's richest man, with a net worth of $2.3 billion.

But it hasn't been a good week. First, China's premier financial magazine said Huang and his brother were under a criminal probe on suspicion of obtaining loans fraudulently. Then the Hong Kong stock market briefly halted trading in shares of his company, GoMe Appliances.

By Thursday afternoon, a spokesman for GoMe Appliances, He Yangqing, was denying the probe and pooh-poohing Huang's No. 1 spot on the wealth ranking.

"We have no comment on the Forbes list. We are focusing on improving our business rather than on how people rank us," He said.

Huang was ranked No. 4 last year, and his wealth has almost doubled in the past 12 months. As a result, his mounting troubles surprise few Chinese. This week's spate of ill fortune only underscores how Chinese view tycoons with fascination and derision.

They marvel at the savvy of new entrepreneurs in China's go-go economy, but they also wonder whether the wealth was earned legitimately. A number of high-flying tycoons sit in jail on fraud and tax-evasion charges.

Other entrepreneurs beg to stay off the list, wary of tax collectors. The rich list has been dubbed the "pig killing list" in vernacular Chinese, meaning that any pig fat enough to get on it is ready for the slaughterhouse.

Magnates frequently face justice. On Oct. 21, authorities jailed Zhang Rongkun, the 33-year-old former chairman of Fuxi Investments, a huge Shanghai holding company, in relation to a pension fund scandal. Zhang was No. 16 on the Forbes list last year, and rising.

In July, a Hong Kong court sentenced Huang Hongsheng, the tycoon founder of Skyworth Digital Holdings, to six years in jail for conspiring to defraud the company.

Jeff Zhou, the editor of Forbes China, said China's economy had grown rapidly without a solid legal framework, leaving many "gray" areas of wealth creation.

"It's the Wild West. China adopted the market-economy system about 20 years ago," Zhou said. "During the transition, there was no clear law to follow."

Many of China's early tycoons grew wealthy because of connections with officials who controlled land for real estate development or state-owned factories.

"A considerable number of rich people in China have a government background or connections with those in power," said Tang Xianxing, a professor or public policy at Shanghai's Fudan University.

Huang, a boyish-looking entrepreneur, parlayed bank loans into China's largest home appliance empire, with 188 retail outlets and superstores across the country.

The finance magazine Caijing reported Monday that police and financial regulators had opened a "massive investigation" into Huang and his elder brother, Huang Junqin. It focuses on whether the Bank of China gave them $165 million in home-mortgage and auto loans from 1997 to 2004 based on fraud or forgery.

The magazine said investigators were looking to see if the loans were pumped into the GoMe retail chain and real estate projects or wired to overseas accounts.

He, the GoMe spokesman, said the firm was helping the inquiry look into another company that had received GoMe bank guarantees but was not under investigation itself.

Old-fashioned connections to power aren't as important as they once were in China. Twenty-three of the 40 people are new to the Forbes list this year, and many grew wealthy when their companies sought listings on overseas stock markets, allowing their shares to soar in value.